AEP readies $2B bill for consumers

Surcharge could average $12 a month for 15 years

American Electric Power is preparing a $2 billion bill to be paid by
all electric customers in the region formerly monopolized by Central
Power and Light. Opponents estimate the surcharge could average between
$12 and $13 per month per household during the next 15 years, beginning
next year.

The application, which could be filed as early as today, would
require state regulatory approval and is a reimbursement for AEP's loss
on the sale of 11 power plants, said spokesman Larry Jones.

Last week, AEP made its last major asset sale, shedding a 25.2
percent share in the South Texas Project nuclear plant to two
co-owners, Houston-based Texas Genco and San Antonio-based CPS Energy,
for $314 million.

Construction on the nuclear plant started in the late 1970s, was
completed in 1989 and cost nearly $6 billion.

Several area cities and consumer organizations are expected to
intervene in the process, arguing some of the charges aren't justified.
One of those charges includes the sale of the nuclear plant about 18
miles from Bay City in Matagorda County.

Because the value of the sale to Texas Genco and CPS Energy didn't
equal the remaining value of AEP's $2.4 billion initial investment, the
company is requesting a recovery of about $1 billion for that
project.

It also could request recovery of another $1 billion for the sale of
10 other power plants at a market value below the remaining value of
the company's investment, Jones said, adding AEP is allowed to recover
these costs under the Electric Choice Act of 1999.

"Lawmakers realized that utilities had made significant investments
to build power plants with the understanding they would be able to
recover costs of the power plant over the plant's life," Jones
said.

South Texas Project

June 6, 1973: Houston Lighting & Power and Central Power
and Light announce they will build the South Texas Project south of Bay
City in Matagorda County. As the nuclear plant gets under way, public
utilities in San Antonio and Austin join. Original cost of project is
set at $946 million.

1975: Plants initial building permit is issued,
followed by years of controversy during construction.

1989: The plant becomes fully operational. CPL owns 25.2
percent of the now $5.3 billion plant along with three other owners:
Houston Lighting & Power (30.8 percent), the city of San Antonio
(28 percent) and the city of Austin (16 percent).

1993: Units 1 and 2 are shut down. The Nuclear Regulatory
Commission announces fines of $175,000 for oversights and management
problems and $325,000 for equipment violations.

1994: Both nuclear reactors are operating at 100 percent
capacity for the first time in 16 months.

Dec. 22, 1997: American Electric Power Co. Inc. announces
merger agreement with Central & South West, CPLs parent
company, for about $6.6 billion in stock, creating a utility giant with
more than 8 million customers in 11 states and England.
2002: AEP announces plans to sell all generation assets owned by Texas
Central. AEPs book value of its share of the STP is about $1.5
billion.

Austin lawyer Geoffrey Gay said he would intervene, representing a
steering committee of South Texas cities, including Corpus Christi,
Laredo and McAllen.

"Residential customers in that service area are paying among the
highest rates in the state," said Charles Johnson, director of
regulatory analysis at the Office of Public Utility Counsel. "That
makes it even more important for our office and the public utility
commission to minimize any additional rate impacts."

Johnson, who represents the state agency charged with defending the
interests of residential and small commercial electric and
telecommunication customers, said the organization likely would
intervene to lower the amount of AEP's request.

Johnson said the group would question the sale of the nuclear plant
to existing owners because this action might have reduced the
competitiveness of the bid. The bid was used as a basis for determining
market value and stranded costs passed on to retail electric providers,
who in turn pass them to customers. Stranded costs are the difference
between the book value of an asset and its market value.

CPS Energy and Texas Genco consider the additional share purchase a
good deal for their customers.

Jim Nesrsta, director of power plant construction and nuclear
oversight for CPS Energy, said the municipally owned utility could
recover its recent investment in less than five years, especially if
gas prices remain steady.

Also, the utility companies were able to purchase the plant at about
$500 per kilowatt, or a quarter of the typical nuclear power investment
of $2,000 per kilowatt, Nesrsta said.